Oil price jumps as US averts 'fiscal cliff'

Wednesday

Jan 2, 2013 at 8:00 AMJan 2, 2013 at 8:56 AM

THE ASSOCIATED PRESS

The price of oil jumped by over a dollar on Wednesday, to above $93 a barrel, after U.S. lawmakers passed legislation to avoid a "fiscal cliff" that could have pushed the world's biggest economy into recession.

The U.S. House of Representatives voted near midnight to send the bill to President Barack Obama after a frantic day of political brinksmanship in Washington.

By early afternoon in Europe, benchmark crude for February delivery was up $1.49 to $93.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.02 to finish at $91.82 per barrel in New York on Monday.

Economists had warned that if Congress did not take action a series of tax increases and spending cuts due to automatically start this year could have helped push the U.S. into recession. They feared a spike in unemployment, which would have resulted in depressed demand for energy.

Some House Republicans at first opposed the bill, which neutralizes middle class tax increases and $24 billion in spending cuts set to take effect over the next two months while raising taxes on the wealthy. They wanted more spending cuts but hours later agreed to a simple yes-or-no vote on the bill, which had already passed the Senate.

As a result of a broad increase in market sentiment, the dollar weakened as investors felt confident to invest in relatively riskier assets. A weaker dollar makes crude cheaper and a more attractive investment for traders using other currencies. On Wednesday, the euro rose to $1.3280 from $1.3213 on Monday, the previous trading session.

Brent crude, used to price various kinds of international oil, was up $1.12 to $112.23 a barrel on the ICE Futures exchange.